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UPDATE 1-UBS brokerage in US stops sales of leveraged ETFs

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NEW YORK, July 27 (Reuters) - The U.S. brokerage business of Switzerland's UBS AG UBSN.VXUBS.N said on Monday it has stopped selling exchange-traded funds that use leverage, saying the investments detract from long-term investing.

UBS Wealth Management Americas said it suspended the sales of leveraged and “inverse” ETFs, effective immediately, saying “the short-term nature of these securities,” especially in volatile markets, is “generally inconsistent” with UBS’ emphasis on long-term investing.

The suspension came after the Financial Industry Regulatory Authority, a brokerage regulator, last month called such ETFs “typically not suitable” for retail investors who plan to hold them for more than one day.

UBS is the latest in a series of brokerages that have recently stopped selling leveraged ETFs. They include St. Louis-based Edward Jones, according to the Wall Street Journal.

FINRA modified this guidance on July 13 by saying the funds can be appropriate for short-term investors whose strategies are “closely monitored” by financial professionals.

Leveraged ETFs use such things as swaps to magnify the daily returns of a particular index. Inverse ETFs are designed to move in the opposite direction of a particular index.

UBS is Switzerland’s largest bank. Its U.S. brokerage unit ended March with 8,760 brokers. FINRA regulates more than 4,800 brokerages. (Reporting by Jonathan Stempel; editing by Matthew Lewis and Andre Grenon)

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